We've reached another era in which everything--business,
technology, science--is moving at light speed. For the past couple
of years, innovative entrepreneurs got all the buzz. Now it's
the entrepreneurial spirit that fuels the innovation everyone's
after. It's what huge corporations call in consultants to get
and what established small businesses need if they want to survive.
And because it's pretty hard for one mind--even the great mind
of an entrepreneur--to be on target all the time, many management
experts suggest that higher-ups should lose the ego and give
employees the opportunity to exercise their own creativity.

Now, empowering employees with the freedom to innovate sounds
great in theory, but as many management consultants know, and as
many large corporations have found out, adopting a new way of
thinking--one that goes against the ingrained corporate
hierarchy--is scary and not typically welcomed with open arms.
It's only when a lucrative business idea or a more
cost-effective way of operating emerges from a company's lower
ranks that senior management wakes up and sees the potential in
allowing employees to escape their hawk-like eye, sit in a basement
office and create something unique.

Where It Starts

It was back in 1976 in a business trends piece for The
Economist that Norman Macrae said corporations should engage in
"alternative ways of doing things in competition with
themselves." By 1983, author Rosabeth Moss Kanter was
suggesting innovation pioneers could be found at all levels of the
organization in The Change Masters: Innovations for Productivity
in the American Corporation (Simon & Schuster).

Then a model to create a "self-organizing" and
"less rigidly hierarchical" workplace emerged: Coining
the word "intrapreneur," or intra-corporate entrepreneur,
Elizabeth and Gifford Pinchot published their book Intrapreneuring in 1985 and made it
their mission to teach large corporations how to make innovation
more cost-effective by using the talents and productivity of their
employees. And they have: Their Bainbridge Island, Washington-based
innovation services firm has helped everyone from 3M and Campbell
Soup to AT&T realize the potential of their employees.

Now everyone, from consulting firms like Pinchot & Co. to
professors from the top B schools, is encouraging businesses to
adopt some form of corporate entrepreneurship, and they're at
their beck and call to help implement those programs. With Texas
Instruments' Speak & Spell, Apple's Macintosh,
Sony's PlayStation and Microsoft's much-anticipated Xbox as
examples of corporate entrepreneurship successes, you can
understand why.

However, letting employees set up shop under your umbrella may
not be the best move for your business. Employees may know their
products and services inside and out and have ideas on how to
expand them or cut costs, but you may think it's too risky to
change the focus of your company. That doesn't mean you
can't learn from the intrapreneurship model.

"It would be too disruptive for small businesses to nurture
things outside the current scope of activities," says Richard
Leifer, associate professor of management and the project manager
for the Radical Innovation Project at Rensselaer Polytechnic
Institute's Lally School of Management and Technology in Troy,
New York. "Focusing on breakthrough improvements within their
current lines of business would be less disruptive."

Another concern is that too many entrepreneurs running around
within one small business could harm ongoing operations. 3M lets
all employees work on developing their own ideas as much as 15
percent of their workday, but Leifer suggests no more than 3
percent of a small company's population should be
"out-of-the-box thinkers."

That leaves us with just one riddle to be solved: How
entrepreneurial can you make your company without giving it a shock
to its system?

"I call this the schizophrenic approach to
management," explains Leifer. "We have to do our current
activities well and continuously improve those activities. At the
same time, we have to think of new ways of creating value and
growth. And unless we find new areas for growth,
companies--especially small ones--will fade away."

Leifer likes the intrapreneurial model in place at 3M ("a
big company that acts small"): If you come up with a good
idea, develop it and get support for it, you can eventually build
that business and manage it. Companies like Lucent and 3M also let
employees share in the profits of their corporate entrepreneurship.
"This may be a little far afield for many small-business
owners," he says, "but look at the upside and the
downside. The upside is, everybody wins: The value of the company
goes up, and you attract interesting people. The downside is, the
traditional entrepreneur loses some direct control."

Giving up control--oh, dear. "Control is elusory
anyway," says Ken Perry, senior consultant at Pinchot &
Co. "What you really want is order. And we believe order
appears more effectively when you allow for
self-organization."

Sound tempting? If you're a small business, assuming a
3M-like form of corporate entrepreneurship wouldn't cause much
of a culture clash. For well-established companies, however, it can
be riskier. But one thing's for sure: Showing employees they
can help create something groundbreaking lifts spirits, boosts
productivity and can create loyalty where most businesses have
little. And that prospect is hard to ignore for entrepreneurs
fighting to stay innovative.

See It In Action

There's no better reason to have more than a few minds
working overtime than your business being in a fast-moving market.
New York City-based Warp Solutions Inc., which uses its proprietary
technology to aid in the distribution of content on the Web,
expects $6 million in 2001 revenue. Because demand for this
relatively new technology is high, innovation is a must.

"The demand for increased functionality is quite
high--functionality that doesn't even exist," says Karl
Douglas, 38, co-founder with John Gnip, 32, and Lenny Primak, 26.
"So you have to have an environment that's very
entrepreneurial, down to the developers that create the technology
itself." Since its start in December 1999, Warp has paid
engineers $10,000 for successful patent applications. And depending
on the technology's revenue potential, stock options may be
offered.

Also crucial to Warp's success is the "raw
material"--sales and marketing data on customer
demand--employees receive. "One of the classic mistakes tech
companies make is, they isolate their marketing and technology
[people] from each other. We set out to do the exact
opposite," says Douglas.

With 70 employees who interact regularly, Warp doesn't need
to host innovation fairs. Ideas are voiced freely and heard. Good
thing, too, because, says Douglas, "it's the only way to
survive."

How It Works

The key is, you and your managers must wholeheartedly accept
that employees should be allowed to create. Neal Thornberry,
faculty director of the School of Executive
Education at Babson College in Wellesley, Massachusetts, has dealt
with companies that entered Babson's corporate entrepreneurship
program but never really seemed to be on board. "We run into
those barriers every time," he says. "Let's [take]
equity [compensation]. We ask senior management, 'Are you
willing to change the way you pay people?' And if they say no,
we say, 'OK, don't do this program anymore, because
you're not serious.'" An additional sign that the
program might not work, says Thornberry, is if the CFO--not the
most willing to invest in anything risky--is overseeing the
program's finances. Thornberry suggests appointing outsiders,
like venture capitalists, to your board to review your innovation
efforts.

What corporate entrepreneurship consultants stress are the
benefits of discovering new talent and the likelihood that if
innovative employees are rewarded properly, they'll stay with
the company rather than resign to start their own businesses.
"Most of the people with the ideas prefer to stay inside
because you have a heck of a brand," says Thornberry.
"[These people] probably already have a pool of talent across
the organization if they can get access to it--and a paycheck every
week. Not everybody's cut out for the start-up entrepreneurship
role."

The thing is, it's hard to tell who has the ability to come
up with fresh ideas, and the dedication to follow through, without
giving everyone a go. When Thornberry taught corporate
entrepreneurship at electrical engineering and electronics company
Siemens eight years ago, he was taken aback when the same
fiftysomething engineer who demanded he be told exactly how to give
a presentation (flip chart or overhead--weighty stuff) went on to
develop a successful business within the company, while two
Stanford MBAs were the first to quit the program for fear it would
throw them off their career paths. Working with food company
Mott's, which found innovators via a competitive application,
Thornberry saw a secretary beat out a senior vice president.
"You never know who could be entrepreneurial unless
they're put in a situation where it might bud," he
says.

"Particularly with the fall of dotcoms, there are a lot of
folks with entrepreneurial tendencies who are now in the
marketplace."

The first step in building an innovation program, says Leifer,
is understanding that entrepreneurial minds are valuable--even
vital--to your company's success. Then you need to designate a
person (or group) to whom employees can turn with new ideas.
"If you identify people tasked with seeking out new
ideas," says Leifer, "there's a greater chance of
those ideas emerging and being supported and nurtured."

If you sense a lack of entrepreneurial thought within your
company, Leifer suggests looking outside. "Particularly with
the fall of the dotcoms, there are a lot of folks with
entrepreneurial tendencies who are now in the marketplace," he
says.

You'll be surprised by not only how re-energized your
employees are once they're granted entrepreneurial
responsibilites, but also the skills they'll learn. "All
of a sudden the five- or 10-person team [of] programmers or
technical engineers has to do sales and marketing [to get their
ideas funded internally], deal with finances and do human resources
work," says Perry. "They're no longer just individual
contributors, but with new management and business skills, they
become candidates for leadership roles outside their specialty
area."

Is It For You?

So how do you know whether you need an innovation program? Here
are a few signs to note, says Leifer: Sales start to erode,
customers start asking whether you're doing anything new, or
good employees start to leave the company. "There's no
cookbook approach," says Leifer. "It depends on the
personalities of the company leaders, the culture of the company
and the industry. But most companies we've seen have to think
about reinventing themselves and [their products] . . . to stay
competitive and successful. It's a big challenge."

Now There's an Idea!

If Bill Ernstrom has his way, lots of ideas will be born from
his corporate entrepreneurship program.

Voyant
Technologies Inc. is four years old, but the company, a
provider of audio-conferencing technology, only started promoting
innovation in the most cost-effective way in February--via its
intranet.

Using that network, Westminster, Colorado-based Voyant's 200
employees learn about the company's history as well as the
"Product Implementation Process"--rules for launching
entrepreneurial ideas. "That's a really important part,
because if you don't know the ground rules, then it's
impossible to do it--even if you have a great idea," says CEO
Bill Ernstrom, 37.

Further fueling innovation is the Bright Ideas program, which
rewards both entrepreneurial successes and failures. The Best
Overall Company Mind Share Contribution goes to ideas that captured
the company's imagination, and the Elisha Gray Award (Elisha
Gray filed for a patent for the telephone a few hours after
Alexander Graham Bell did) goes to near-successes. The reward: a
nice plaque and stock options. "We steer away from [money
awards]," says Ernstrom. "Everyone has stock options, so
we try to steer toward, 'Hey, we're all pulling the same
way, and we all win if it's pulled together.'"

Mimicking the VC process, Voyant executives review new
ideas--which tend to stay in the market space, although the company
doesn't limit itself in that way--and supply the high-potential
innovations with funding.

Ernstrom says most ideas come from tech employees, but
there's no rule saying ideas can't come from anywhere in
the company. New projects are still germinating, so it's too
early to tell whether Bright Ideas is working, but Ernstrom says
Voyant's sticking with the program for now. "We try to
find things that are inexpensive but really innovative," he
says. "And that's clearly what an entrepreneur
does."